SINGAPORE (Oct 29): The steep overnight drop in the US markets pushed the Straits Times Index below the 3,000-point benchmark at one juncture to as low as 2,984.47 on Oct 25. Year to date (YTD), the STI has dropped 11.65% to close at 3,012.84 points on Oct 25.
“Overall, although we can’t tell when market sentiment will improve, we do believe that at a bottom-up fundamental level, companies are still doing well,” says Steve Medina, chief investment officer for global equities at Manulife Asset Management.
He notes that valuations of many companies are now more attractive than they have been in the recent past. This, coupled with strong underlying fundamentals, suggests that many of them are being unjustly punished. “This combination would seem to bode well for long-term investors,” he says.
From Manulife Asset Management’s perspective, a US recession should not be a near-term worry. “The market is certainly fearful of that, as seen in the rotation out of higher-growth tech and healthcare names and into defensive stocks such as staples and utilities,” says Medina.
As usual, geopolitical issues and incidents helped stoke fear among investors. The death of Saudi journalist Jamal Khashoggi in Istanbul has generated a wave of international repercussions.
US legislators, for example, are calling for sanctions on weapon sales to Saudi Arabia. German Chancellor Angela Merkel on Oct 21 announced that arms sales to Saudi Arabia were to be put on hold.
Khashoggi, a critic of Saudi Prince Mohammed bin Salman and an advocate for freedom of speech in Saudi Arabia, was initially said to have been killed in a brawl. However, Turkey President Recep Erdogan is insisting the killing was planned days before Khashoggi arrived in Istanbul, calling it a “political murder”.
On Oct 23, oil prices plunged 5% to two-month lows of US$66.43 as a selloff in global equity markets raised worries about demand growth, and following Saudi Arabia’s assurance that it could supply more crude oil quickly if needed, easing concerns ahead of US sanctions on Iran on Nov 4.
Stephen Innes, head of trading for Asia-Pacific at OANDA, says, “Oil bulls are not letting go of a possible Saudi retaliation after oil prices have caught an early bid in Asia as US President Donald Trump vows ‘some retribution’ for Khashoggi’s death”, which draws a clear link between escalating Middle East geopolitical risk, and oil prices.
Developments in the global situation, including the ongoing US-China trade war, have given an excuse for joint-venture partners Heeton Holdings, KSH Holdings, Oxley Holdings and SLB Development to delay their November launch of the Gaobeidian project in China. It was to have been for the sale of the residential units in Phase I of the project. The JV has yet to announce a new launch date, but says it will be when market sentiment improves.
Temasek Holdings’ T2023-S$ bonds started trading at 9am on Oct 26. The state investment firm’s maiden retail bond offering was upsized to $300 million from $200 million after valid applications amounting to $1.675 billion were received at the close of offer on Oct 23 noon, making it about five times oversubscribed.
Shares in MeGroup, the Malaysian manufacturer of noise, vibration and harshness components for cars, will begin trading on the Catalist board of the Singapore Exchange on Oct 31. Set at 23 cents per share, the IPO will close on Oct 29.
Meanwhile, Vard Holdings will be delisted from the SGX from Nov 2. Fincantieri Oil & Gas, which owns 79.34% of Vard, has offered 25 cents per share to buy out other shareholders. Getting shareholders’ approval had not been easy, however, as Vard was ordered by SGX RegCo to hold a second extraordinary general meeting after the first one ended in dispute over errors in the independent financial adviser’s document.
In an Oct 12 report, DBS Group Research said 2019 could be the year that retail real estate investment trusts (REITs) will have their chance to shine, given consistently strong take-up rates for upcoming retail spaces this year, which are a reflection of healthy demand in the retail sector.
This week, retail REITs CapitaLand Retail China Trust and Starhill Global REIT will be announcing their results on Oct 30.
Other Singapore REITs (S-REITs) scheduled to release their results are Far East Hospitality Trust and CDL Hospitality Trusts on Oct 30 and and Ascendas Hospitality Trust on Oct 31.
Writes RHB analyst Vijay Natarajan in an Oct 16 report: “We note that S-REITs still offer the highest yields among REITs globally and believe defensive plays such as REITs will still find favour with investors due to the volatile macroeconomic environment.”
Venture Corp will be releasing its 3QFY2018 results on Nov 2. The group, one of the makers of Phillip Morris International’s I Quit Ordinary Smoking (IQOS) device, has been maintained at “hold” by UOB Kay Hian following Phillip Morris’ 3QFY2018 earnings release on Oct 18, which reflected strong operating metrics but a more mixed outlook on the device production split, says analyst Foo Zhiwei. YTD, shares in Venture are trading 27.4% lower at $15.75.
Other companies reporting this week include Great Eastern Holdings, Micro-Mechanics Holdings and Raffles Medical Group on Oct 29; Second Chance Properties on Oct 30; China Aviation Oil (Singapore) Corp and Oversea-Chinese Banking Corp on Nov 1; and Sembcorp Industries and Challenger Technologies on Nov 2.